Question

For its three investment centers, Gerrard Company accumulates the following data: I II III Sales $2,060,000 $4,019,000 $4,085,000 Controllable margin 1,267,000 2,579,840 4,137,800 Average operating assets 5,068,000 8,062,000 12,170,000 Compute the return on investment (ROI) for each center. I II III The return on investment % % % Click if you would like to Show Work for this question: Open Show Work

Answer 1

Answer:

Investment centre           ROI

1                                    24.9%

II                                   32.0%

III                                 34.0%

Explanation:

Return on Investment is the proportion of operating assets that an investment center earned as as net operating income.

It is calculated as follows

ROI = operating income/operating assets

Investment centre

I                                            1,267,000/5,068,000=24.9%

II                                              2,579,840/8,062,000=32.0%

III                                          4,137,800/12,170,000=34.0%